<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_______________to_______________
Commission file number 0-12992
SYNTHETECH, INC.
(Exact name of registrant as specified in its charter)
Oregon 84-0845771
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization Identification No.)
1290 Industrial Way, Albany, Oregon 97321
(Address of Principal Executive Offices) (Zip Code)
(541) 967-6575
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_____
The number of shares of the registrant's common stock, $.001
par value, outstanding as of August 6, 1997 was 13,882,021.
<PAGE> 2
SYNTHETECH, INC.
BALANCE SHEETS
-------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
(unaudited)
June 30, March 31,
1997 1997
--------- ---------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 4,958,000 $ 6,740,000
Securities available for sale 186,000 176,000
Accounts receivable, less allowance
for doubtful accounts of $15,000
for both periods 981,000 695,000
Inventories 2,212,000 1,887,000
Prepaid expenses 110,000 164,000
Income tax receivable 730,000 798,000
Deferred income taxes 56,000 56,000
Other current assets 1,000 4,000
---------- ----------
TOTAL CURRENT ASSETS 9,234,000 10,520,000
PROPERTY, PLANT AND EQUIPMENT, at cost, net 7,505,000 6,339,000
SECURITIES AVAILABLE FOR SALE 452,000 450,000
OTHER ASSETS 14,000 14,000
---------- ----------
TOTAL ASSETS $17,205,000 $17,323,000
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE> 3
SYNTHETECH, INC.
BALANCE SHEETS
---------------------------
(continued)
<TABLE>
<CAPTION>
<S> <C> <C>
(unaudited)
June 30, March 31,
1997 1997
- --------------------------------------- ---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------
CURRENT LIABILITIES:
Current portion of note payable $ 13,000 $ 13,000
Accounts payable 576,000 543,000
Accrued compensation 85,000 674,000
Deferred revenue 44,000 44,000
Other accrued liabilities 8,000 4,000
----------- -----------
TOTAL CURRENT LIABILITIES 726,000 1,278,000
DEFERRED INCOME TAXES 70,000 68,000
NOTE PAYABLE, net of current portion 177,000 180,000
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value;
authorized 100,000,000 shares;
issued and outstanding,
13,882,000 and 13,860,000 shares 14,000 14,000
Paid-in capital 8,416,000 8,296,000
Employee notes receivable and
deferred compensation (229,000) (239,000)
Unrealized gain on securities
available for sale 17,000 16,000
Retained earnings 8,014,000 7,710,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 16,232,000 15,797,000
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $17,205,000 $17,323,000
=========== ===========
See notes to financial statements.
</TABLE>
<PAGE> 4
SYNTHETECH, INC.
STATEMENTS OF INCOME
------------------------
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For The Three Month Period Ended June 30 1997 1996
- ----------------------------------------- ---------- ----------
REVENUES $1,480,000 $3,521,000
COST OF SALES 723,000 1,128,000
----------- -----------
GROSS PROFIT 757,000 2,393,000
RESEARCH AND DEVELOPMENT 61,000 69,000
SELLING, GENERAL AND ADMINISTRATIVE 289,000 279,000
---------- ----------
OPERATING EXPENSE 350,000 348,000
---------- ----------
OPERATING INCOME 407,000 2,045,000
OTHER INCOME 83,000 83,000
---------- ----------
INCOME BEFORE INCOME TAXES 490,000 2,128,000
PROVISION FOR INCOME TAXES 186,000 809,000
---------- ----------
NET INCOME $ 304,000 $1,319,000
========== ==========
NET INCOME PER COMMON SHARE $0.02 $0.09
===== =====
SHARES USED IN PER SHARE CALCULATION 14,288,506 14,204,911
========== ==========
See notes to financial statements.
</TABLE>
<PAGE> 5
SYNTHETECH, INC.
STATEMENTS OF CASH FLOWS
-----------------------------
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
For The Three Month Period Ended June 30 1997 1996
- ---------------------------------------- ------- -------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 304,000 $1,319,000
Adjustments to reconcile net
income to net cash provided by (used
in) operating activities:
Depreciation, amortization and other 85,000 55,000
Amortization of deferred compensation 27,000 8,000
Accrued interest on securities
available for sale (10,000) (16,000)
Loss on sale of property, plant
and equipment 1,000 -
(Increase) decrease in assets:
Accounts receivable, net (286,000) (114,000)
Inventories (325,000) (236,000)
Prepaid expenses 54,000 (41,000)
Income tax receivable 68,000 152,000
Other assets 3,000 -
Increase (decrease) in liabilities:
Accounts payable and accrued
liabilities (552,000) 600,000
Deferred revenue - (54,000)
--------- --------
Net cash (used in) provided
by operating activities (631,000) 1,673,000
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment purchases (1,248,000) (563,000)
Proceeds from sale of property, plant
and equipment 1,000 -
---------- ----------
Net cash used in investing
activities (1,247,000) (563,000)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term
debt obligations (3,000) -
Proceeds from stock option
exercises and disqualifying
dispositions 99,000 151,000
Payments related to stock registration - (18,000)
---------- ---------
Net cash provided by financing
activities 96,000 133,000
---------- ---------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (1,782,000) 1,243,000
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 6,740,000 5,049,000
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $4,958,000 $6,292,000
========== ==========
NON-CASH INVESTING ACTIVITIES:
Unrealized gain (loss) on securities
available for sale $1,000 ($5,000)
Issuance of stock options at below
fair value $21,000 -
See notes to financial statements.
</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
NOTE A. GENERAL AND BUSINESS
The summary financial statements included herein have
been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although Synthetech
management believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
summary financial statements be read in conjunction with the
financial statements and the notes thereto included in
Synthetech's 1997 Form 10-KSB.
Interim financial statements are by necessity somewhat
tentative; judgments are used to estimate quarterly amounts for
items that are normally determinable only on an annual basis.
For example, provision for income taxes is an estimate of the
annual liability pro-rated over the quarters of the fiscal year
based on estimates of annual income. Further, all inventory
quantities are verified by physically counting the units on hand
at least once a year. Normally, selected inventories are counted
at the end of each quarter. For those inventories not counted at
the end of the quarter, quantities are determined using measured
sales and production data for the period.
The interim period information included herein reflects all
adjustments which are, in the opinion of Synthetech management,
necessary for a fair statement of the results of the respective
interim periods. Results of operations for interim periods are
not necessarily indicative of results to be expected for an
entire year.
NOTE B. STATEMENTS OF CASH FLOWS
Supplemental cash flow disclosures for the three month
period ended June 30:
<TABLE>
<CAPTION>
<S> <C> <C>
Cash Paid
--------- 1997 1996
---- ----
Income Taxes $79,000 $ 5,000
Interest $ 5,000 $ -
</TABLE>
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE C. EARNINGS PER SHARE
Earnings per share are computed using the weighted average
number of common shares and common stock equivalents (stock
options and warrants) outstanding during the applicable period.
In February 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings per Share", superseding Opinion
15. SFAS No. 128 requires the calculation and disclosure of
Basic Earnings per Share and Diluted Earnings per Share,
effective for both interim and annual periods ending after
December 15, 1997. Basic earnings per share are computed by
dividing net income by the weighted average number of shares of
common stock outstanding during the period. Diluted earnings per
share are computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents
outstanding during the period, calculated using the treasury
stock method as defined in SFAS No. 128. In accordance with the
provisions of SFAS No. 128, the Company is providing pro forma
disclosure of the effects of this accounting change on reported
earnings per share (EPS) data as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
For The Three Months Ended June 30 1997 1996
----------------------------------- ---- ----
Primary EPS as reported $0.02 $0.09
Effect of SFAS No. 128 - $0.01
----- -----
Basic EPS as restated $0.02 $0.10
===== =====
Primary EPS as reported $0.02 $0.09
Effect of SFAS No. 128 - -
----- -----
Diluted EPS as restated $0.02 $0.09
===== =====
Weighted average shares
outstanding for Basic EPS 13,866,373 13,515,427
Common stock options and warrants
issuable under treasury stock
method 422,133 661,752
---------- ----------
Weighted average common and
common equivalent shares
outstanding for Diluted EPS 14,288,506 13,177,179
========== ==========
</TABLE>
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth, for the periods indicated,
the percentage of revenues represented by each item included in
the Statements of Income.
Percentage of Revenues
----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
For The Three Month Period Ended June 30 1997 1996
- ----------------------------------------- ----- -----
Revenues 100.0 % 100.0 %
Cost of sales 48.9 32.0
----- -----
Gross Profit 51.1 68.0
Research and Development 4.1 2.0
Selling, General and Administration 19.5 7.9
----- -----
Operating Income 27.5 58.1
Other Income 5.6 2.4
----- -----
Income Before Income Taxes 33.1 60.5
Provision For Income Taxes 12.6 23.0
----- -----
Net Income 20.5 37.5
===== =====
</TABLE>
Revenues
- --------
Revenues decreased by 58% to $1.48 million in the first
quarter of fiscal 1998 from $3.52 million in the first quarter of
fiscal 1997. International sales, mainly to Japan and Western
Europe, were $767,000 in the first quarter of fiscal 1998 as
compared to $516,000 for the first quarter of fiscal 1997.
<PAGE> 9
Revenues for the first quarter of fiscal 1997 included sales
associated with Peptide Building Block (PBB) orders for use in
late stage clinical trials by two customers of $1.35 million and
$1.30 million, respectively, representing 75% of revenues for the
quarter. By contrast, the largest customer for the first quarter
of fiscal 1998 accounted for significantly less revenue at less
than 25% of revenues for the quarter. The reduction in revenues
for the first quarter of fiscal 1998 from the first quarter of
fiscal 1997 demonstrates the continuing potential for period to
period fluctuations in sales of products. Moreover, as a
supplier of PBBs for drugs in various stages of development, the
Company's orders are always subject to curtailment or
cancellation. For example, one of the customers referenced above
for the first quarter of fiscal 1997 advised the Company that it
was pursuing an alternate lower-cost manufacturing process and
discontinued ordering from the Company in the second quarter of
fiscal 1997.
The Company has not yet established a stable baseload of
demand for its products. The Company's products are part of a
new and emerging market with sizable fluctuations in orders
between periods. In most instances, order or reorder cycles for
products are not predictable. Demand for PBBs is extremely
variable since individual clinical trial programs are always
subject to significant risk of suspension or early cancellation
and only a small percentage of drugs in clinical trial programs
are ultimately approved for market use. As a result, the Company
expects to continue to see fluctuations in its revenue from
period to period. (See "Industry Factors" below.)
Gross Profit
- ------------
Gross profit was $757,000 or 51% of revenues in the first
quarter of fiscal 1998 as compared to $2.39 million or 68% of
revenues in the first quarter of fiscal 1997. The decrease in
gross profit as a percentage of revenue resulted primarily from
the lower level of revenue and, to a lesser extent, the mix of
products. The Company expects revenue to continue to fluctuate
from period to period and cause variations in gross profit
margins. Decreased revenues will tend to have the affect of
reducing gross profit margins since a portion of the Company's
manufacturing overhead costs are relatively fixed.
Operating Expenses
- ------------------
Research and development (R&D) and selling, general and
administrative (SG&A) expenses were $350,000 in the first quarter
of fiscal 1998 compared to $348,000 in the first quarter of
fiscal 1997. As a percentage of revenues, R&D and SG&A expenses
increased to nearly 24% in the first quarter of fiscal 1998 from
nearly 10% in the same period of fiscal 1997 due to the lower
level of revenues.
Operating Income
- ----------------
Operating income decreased to $407,000 or over 27% of revenues in
the first quarter of fiscal 1998 compared with $2.05 million
or 58% of revenues in the first quarter of fiscal 1997.
<PAGE> 10
Other Income
- ------------
The net other income of $83,000 in the first quarter of
fiscal 1998 and the first quarter of fiscal 1997 came primarily
from interest earnings.
Net Income
- ----------
For the first quarter of fiscal 1998 the Company earned
$490,000 before income taxes. A provision for income taxes of
$186,000 resulted in net income of $304,000. The Company's
effective tax rate was 38% for the first quarter of fiscal 1998
and the first quarter of fiscal 1997.
INDUSTRY FACTORS
- ----------------
The market for PBBs is driven by the market for the peptide-
based drugs in which they are incorporated. The drug development
process is dictated by the marketplace, drug companies and the
regulatory environment. The Company has no control over the pace
of peptide-based drug development, which drugs get selected for
clinical trials, which drugs are approved by the FDA and, even if
approved, the ultimate potential of such drugs. Since there are
only a handful of approved peptide-based drugs on the market
today, this market is still very early in development and a
substantial amount of the activity is occurring at the earlier
stages of research and development and clinical trials.
Developments of new biological information, based on
rational drug design and combinatorial chemistry, are creating
additional peptide-based drug candidates. Cost pressures in the
pharmaceutical industry, however, have tightened the criteria
used to assess drug prospects at all phases of drug development
programs. Cost pressures in the pharmaceutical industry can also
cause pharmaceutical companies to investigate alternative drug
manufacturing processes which may not include the Company's
products as an intermediate.
As a supplier of building blocks for peptide-based drugs,
the Company's revenue will be affected by these industry factors.
Development cycles typically are quite prolonged. For instance,
in 1993 Synthetech began supplying a PBB for clinical trials to
one customer which recently filed a new drug application with the
FDA. Similarly, Synthetech began supplying PBBs at the early
development stages in 1990 for a peptide containing product which
Synthetech's customer recently commenced initial marketing
efforts. Also, the high cancellation rate for drug development
programs results in a significant likelihood that there will be
no subsequent or "follow-on" PBB sales for any particular drug
development program. Since the Company's revenue comes
predominantly from PBBs used in drug development programs, the
overall impact on the Company's business from the cancellation
rate will depend, to a large extent, on the rate of new drug
development efforts being commenced.
The advancement of a drug for which Synthetech is providing
PBBs from a drug development program into an "approved" status by
the FDA could also significantly affect the Company's business if
Synthetech is able to continue to supply the PBBs for the
approved drug. With the increased volume typically associated
with "approved" drugs, the Company, however, expects to face
increased competition for this business.
Due to the wide range of drugs under development at various
stages, sizable fluctuations in orders, and the unpredictability
of order or reorder cycles for products and the other factors
discussed herein, the Company does not have a stable baseload of
demand for its products and cannot estimate the potential market
for its products. Moreover, the Company's customers vary
substantially from year to year and the Company currently cannot
<PAGE> 11
rely on any one customer as a constant source of revenue. For
the foregoing reasons, the Company has experienced in the past,
and is likely to experience in the future, significant
fluctuations in its quarterly results.
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, the Company had working capital of $8.51
million compared to $9.24 million at March 31, 1997. The
Company's cash, cash equivalents and short term securities
available for sale at June 30, 1997 totaled $5.14 million. In
addition, the Company had a $1 million bank line of credit of
which there was no amount outstanding at June 30, 1997.
The increase in accounts receivable to $981,000 at June 30,
1997 from $695,000 at March 31, 1997 reflected the timing of
shipments during the quarter. The increase of inventory to $2.21
million at June 30, 1997 from $1.89 million at March 31, 1997
primarily resulted from replenishing lower levels of raw material
and finished product inventory items. The decrease in accrued
compensation to $85,000 from $674,000 reflected the payment in
the first quarter of fiscal 1998 of bonuses accrued for fiscal
1997.
The Company had approximately $1.25 million of capital
expenditures during the first three months of fiscal 1998.
Approximately $34,000 was spent for equipment and equipment
upgrades in the existing plant and $1.22 million was spent for
the new plant expansion. The Company anticipates total capital
expenditures for fiscal 1998 for the existing plant to be
$500,000 and for the new plant expansion to be $2.91 million for
a total of $3.41 million. The total cost of the plant expansion
is now estimated to be $7.70 million and is expected to be
complete by the end of September 1997. Company continues to
expect to finance a majority of these capital expenditures from
internal cash flow.
___________________
Certain statements in the Company's Form 10-Q contain
"forward-looking" information (as defined in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934) that involve risks and uncertainties, including, but
not limited to, potential quarterly revenue fluctuations,
uncertain market for products, technological change, customer
concentration, the impact of competitive products and pricing,
and the increased costs associated with the Company's facility
expansion. These forward-looking statements should be considered
in light of the uncertainties and other risks detailed in the
Company's Securities and Exchange Commission Filings, including
the Company's Form 10-KSB for the fiscal year ended March 31,
1997.
<PAGE> 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1* Articles of Incorporation
3.2* Bylaws
10.1 Form of contract entered into by each of Mr. Philip L.Knutson,
Mr. M. Sreenivasan, and Mr. Charles B. Williams dated July 18, 1997.
27 Financial Data Schedule
__________________
*Incorporated by reference herein from the Company's Form
10-K for the year ended March 31, 1991.
(b) Reports
No reports on Form 8-K were filed during the quarter.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SYNTHETECH, INC.
(Registrant)
Date: August 12, 1997 /s/ M. Sreenivasan
M. Sreenivasan
President & C.E.O.
Date: August 12, 1997 /s/ Charles B.Williams
Charles B.Williams
Vice President, Finance
and Administration, C.F.O.,
Chief Accounting Officer
<PAGE> 14
Exhibit 10.1
of Form 10-Q
AGREEMENT
This Agreement is entered into by and between Synthetech, Inc.
(the "Company") and _______________ (the "Executive") as of
_________, 1997.
1. Employment
The Company hereby agrees to employ Executive as
________________, and Executive hereby agrees to render his
services to the Company in accordance with the terms and
conditions of this Agreement. Executive shall have
responsibilities normally associated with the ___________________
positions and have such other duties and authority as shall be
determined from time to time by the President of the Company.
During the term of his employment hereunder, Executive will
devote substantially all of his business time and best efforts to
the performance of his duties hereunder.
2. Employment at Will
Both parties agree that the employment is on an "at will" basis
and may be terminated by either party at any time and for any
reason.
3. Base Salary and Bonus
The Company shall pay Executive a monthly salary of $_______ on
the last day of each month, payable in arrears. The parties
acknowledge that Executive is considered to be exempt from
statutory requirements governing overtime pay, and, accordingly,
Executive will be expected to work such actual amount of time as
may be necessary to fulfill Executive's duties and
responsibilities. The Company in its sole discretion may also
pay cash bonuses and/or grant stock options to Executive from
time to time. The Company and Executive shall also review the
monthly salary from time to time to determine whether an
adjustment should be made prospectively. The monthly salary
amount set forth in the first sentence of this Section 3 shall be
deemed to be automatically amended upon the parties' agreement to
adjust such salary as evidenced by an adjustment in the monthly
paycheck delivered to the Executive.
4. Rules and Regulations
Executive shall comply in all respects with the Company's rules
and regulations.
5. Executive Benefits
Executive shall be provided employee benefits in accordance with
the Company's policies from time to time.
6. Business Expenses
Reasonable travel, entertainment and other business expenses
incurred by Executive in the performance of his duties hereunder
shall be reimbursed by the Company in accordance with the
Company's policies in effect from time to time.
7. Noncompetition
(a) During the term of Executive's employment by the Company and
for twelve (12) months thereafter, Executive agrees that he will
not, without prior written consent of the Company (other than
ownership of securities of publicly held corporations of which
Executive owns less than one percent of any class of outstanding
securities) directly or indirectly, whether as employee, officer,
director, independent contractor, consultant, stockholder,
partner, agent or otherwise, engage in or assist others to engage
in or have any interest in any business which competes with the
actual business of the Company anywhere within the marketing area
served by the Company during the period of Executive's employment
PAGE 1
<PAGE> 15
with the Company or with the demonstrably anticipated future
business of the Company at the time of Executive's termination of
employment.
(b) If the Company chooses, the Company may in its sole
discretion extend the expiration of the noncompete period to
24 months after termination of employment by notifying Executive
no later than nine months after the termination date of
employment and paying the consideration set forth in Section 9(b)
below.
8. Nonsolicitation
(a) While employed at the Company and for a period of twelve
(12) months thereafter, Executive will not directly or indirectly
(i) induce or attempt to influence directly or indirectly any
employee of the Company to terminate his/her employment with the
Company or to work for Executive or any other person or entity;
(ii) employ or offer employment to any person who was employed by
the Company unless such person shall have ceased to be employed
by the Company for a period of at least twelve (12) months;
(iii) make known to any person, firm or corporation the names and
addresses of any vendors or customers of the Company or contacts
of the Company or any other information pertaining to such
persons; (iv) solicit, take away, or attempt to take away, any
customers of the Company on whom Executive calls or with whom
Executive becomes acquainted during Executive's employment with
the Company, whether for Executive or for any other person, firm
or corporation.
(b) If the Company chooses, the Company may in its sole
discretion extend the expiration of the nonsolicitation period to
24 months after termination of employment by notifying Executive
no later than nine months after the termination date of
employment and paying the consideration set forth in
Section 10(b) below.
9. Compensation for Noncompetition Agreement
(a) As compensation for Executive's obligations under
Section 7(a) of this Agreement, the Company agrees to pay to
Executive (i) twelve monthly installments equal to fifty percent
(50%) of the average monthly base salary earned by Executive over
the 12 months immediately preceding the termination of employment
and (ii) twelve monthly cash installments for health insurance
coverage. These cash installments for health insurance coverage
shall equal the monthly cost of the health insurance coverage (at
the time of Executive's termination of employment) required to be
offered under COBRA to former employees. Such payments shall
commence at the end of the first full month after Executive's
termination of employment and at the end of each of the next
11 months thereafter.
(b) If the Company in its sole discretion desires to extend the
expiration date of the noncompete to 24 months after the
termination date of the Executive's employment with the Company,
the Company shall continue to pay Executive the monthly sum
calculated (i) pursuant to Section 9(a)(i) for 12 additional
monthly installments and (ii) pursuant to Section 9(a)(ii) for
12 additional monthly installments, each commencing on the first
anniversary of the first payment under Section 9(a) and at the
end of the next 11 months thereafter.
(c) The Company's obligations under Section 9 shall terminate
upon the death of the Executive. Thus, upon the death of
Executive, Executive shall be paid any amounts due under
Section 9 prorated through the date of Executive's death.
10. Compensation for Nonsolicitation Agreement
(a) As compensation for Executive's obligations under
Section 8(a) of this Agreement, the Company agrees to pay to
Executive twelve monthly installments equal to fifty percent
(50%) of the average monthly base salary earned by Executive over
the 12 months immediately preceding the termination of
employment. Such payment shall commence at the end of the first
full month after Executive's termination of employment and at the
end of each of the next 11 months thereafter.
(b) If the Company in its sole discretion desires to extend the
expiration date of the nonsolicitation to 24 months after the
termination date of the Executive's employment with the Company,
the Company shall continue to pay Executive the monthly sum
calculated pursuant to Section 10(a) for 12 additional monthly
installments, commencing on the first anniversary of the first
payment under Section 10(a) and at the end of the next 11 months
thereafter.
(c) The Company's obligations under Section 10 shall terminate
upon the death of the Executive. Thus, upon the death of
Executive, Executive shall be paid any amounts due under
Section 10 prorated through the date of Executive's death.
PAGE 2
<PAGE> 16
11. Declaration and Acknowledgement
Promptly after termination of his employment but in no event
later than the date of the Company's first payment to Executive
pursuant to this Agreement, Executive agrees to execute the
Declaration and Acknowledgement attached as Exhibit A hereto.
12. Term
This Agreement shall continue without a set termination date;
provided, however, that either party may terminate this Agreement
by delivering to the other party written notice of termination
("Termination Notice") two years prior to the effective
termination date. Upon delivery of such notice, the Agreement
shall terminate on the second anniversary of the delivery of the
Termination Notice unless prior to the date of termination,
Executive's employment by the Company shall have been terminated,
in which case, this Agreement will terminate upon the first
anniversary of the Executive's termination of employment, unless
the Company shall have exercised its options pursuant to
Sections 9(b) and 10(b), in which case this Agreement shall
terminate on the second anniversary of Executive's termination of
employment. Notwithstanding anything to the contrary in this
Agreement, either party may terminate the employment relationship
at any time and for any reason. Upon such termination, the
Executive shall be paid his base salary prorated through the date
of termination of employment and any additional amounts due under
Sections 9 and 10.
13. Remedies
Executive acknowledges that the provisions of Sections 7 and 8
hereof are reasonable and necessary for the protection of the
Company and that the Company will be irrevocably damaged if such
provisions are not specifically enforced. Accordingly, in the
event of breach or threatened breach of the provisions of Section
7 or 8 hereof, it is understood and agreed that the Company shall
be entitled to injunctive relief (without bond or other security
being required) as well as any and all other applicable remedies
at law and in equity. Should a court of competent jurisdiction
declare any of these provisions unenforceable due to an
unreasonable restriction, or for any other reason, such court
shall have the express authority of the parties of this Agreement
to reform such provisions and/or to grant the Company any and all
other relief, at law or in equity, reasonably necessary to
protect the interests of the Company. Executive expressly
acknowledges that (i) he has had the opportunity to be
represented by separate legal counsel in connection with the
negotiation of this Agreement and (ii) he considers these
provisions to be reasonable.
14. No Waiver
The failure by either Executive or Company to require performance
by the other with respect to any provision hereof shall not
affect the right of such party to enforce such provision, nor
shall the waiver by Executive or Company of any breach hereunder
be deemed a waiver of any succeeding breach or a modification of
any of the terms hereof.
15. Entire Agreement
Executive agrees that this Agreement shall be governed for all
purposes by the laws of the State of Oregon as such law applies
to contracts to be performed within Oregon by residents of Oregon
and that venue for any action arising out of this Agreement shall
be proper only in Multnomah County, Oregon or in the United
States Federal District Court for the District of Oregon. If any
provision of this Agreement shall be declared excessively broad,
it shall be construed so as to afford the Company the maximum
protection permissible by law. This Agreement sets forth the
entire Agreement of the parties as to Executive's employment at
the Company and any representations, promises, or conditions in
connection therewith not in writing and signed by both parties
shall not be binding upon either party. The terms and conditions
of this Agreement shall survive termination of employment
hereunder.
16. Withholding and Offset
Payment of salary and any other amounts to Executive will be
subject to such withholding as may be required by law and any
other offsets against amounts owing the Company by Executive.
PAGE 3
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered as of the date first above
written.
EXECUTIVE:
______________________________________
Address:____________________________
____________________________________
SYNTHETECH, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
Address: 1290 Industrial Way
Albany, OR 97321
PAGE 4
<PAGE> 18
EXHIBIT A
Declaration and Acknowledgement
1. In connection with his termination of employment, the
undersigned hereby declares and acknowledges as follows:
a. He has returned to Synthetech, Inc. ("Synthetech")
all keys, credit cards, computer files, materials and
other property owned by the Company.
b. He acknowledges and agrees that he is subject to
the provisions of the Proprietary Information and
Employee Inventions Agreement regarding use and
disclosure of Confidential Information (as defined
therein).
c. He acknowledges and agrees that he is subject to
the portion of the Agreement dated as of ____________,
1997 between the undersigned and Synthetech regarding
noncompetition and nonsolicitation.
2. Synthetech acknowledges that it has the financial
obligation to the undersigned pursuant to Section 9 and 10
of the Agreement dated as of ____________, 1997 between the
undersigned and Synthetech.
IN WITNESS WHEREOF, the parties have executed this
Declaration and Acknowledgement.
__________________________________
_____________________
SYNTHETECH, INC.
By:________________________________
Name:______________________________
Title:_____________________________
PAGE 1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the June 30, 1997 10-Q Balance Sheets, Income Statements, and
Cash Flow Statements, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 4958000
<SECURITIES> 186000
<RECEIVABLES> 996000
<ALLOWANCES> 15000
<INVENTORY> 2212000
<CURRENT-ASSETS> 9234000
<PP&E> 7505000
<DEPRECIATION> 0
<TOTAL-ASSETS> 17205000
<CURRENT-LIABILITIES> 726000
<BONDS> 0
<COMMON> 14000
0
0
<OTHER-SE> 16218000
<TOTAL-LIABILITY-AND-EQUITY> 17205000
<SALES> 1480000
<TOTAL-REVENUES> 1480000
<CGS> 723000
<TOTAL-COSTS> 1073000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 490000
<INCOME-TAX> 186000
<INCOME-CONTINUING> 304000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 304000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
